McNary Elementary School District No. 23

SECTION III - FEDERAL AWARD FINDINGS AND QUESTIONED COSTS 2024-002 Impact Aid Parent Pupil Surveys CFDA No: 84.041 Program Name: Impact Aid Award Number: N/A Federal Agency: U.S. Department of Education Pass-Through Grantor: N/A Compliance Requirement: L. Reporting Questioned Costs: N/A Summary of Finding: Material weakness in internal control over major programs Repeat Finding? No Condition The District reported 164 students within the Impact Aid application for the fiscal year 2024. The district provided 55 “Parent Pupil Surveys” which reflected 95 students total. Criteria The Uniform Guidance section 200.333 states: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report" 34 CFR 222.9 and .10 states: "An LEA must retain the records to support the amount of payment it received under the Act for any fiscal year until the later of (a) Three years after the last payment for a fiscal year; or (b) If the records have been questioned on Federal audit or review, until the question is finally resolved and any necessary adjustments to payments have been made." Cause The District experienced turnover in positions responsible for overseeing the single audit. Effect The District is not in compliance with the requirements of the Uniform Guidance and related federal grant federal regulations . Recommendation We recommend that the District aggregate and reconcile all application documentation. Then the District should scan all supporting documentation and place in a secured central location electronically and/or physically.

2024-003 Single Audit Submission CFDA No: 84.041 Program Name: Impact Aid Award Number: N/A Federal Agency: U.S. Department of Education Pass-Through Grantor: N/A Compliance Requirement: L. Reporting Questioned Costs: N/A Summary of Finding: Significant Deficiency in internal control over major programs Repeat Finding? No Condition The District did not submit the single audit reporting package and related data collection form by the required deadline. Criteria The Uniform Guidance section 500.512 states: "...The audit must be completed and the data collection form....and reporting package....must be submitted within the earlier of 30 calendar days after receipt of the auditor’s reports, or nine months after the end of the audit period." Cause The District experienced turnover in positions responsible for overseeing the single audit. Effect The District is not in compliance with the requirements of the Uniform Guidance. Recommendation We recommend that the District monitor federal grant expenditures and if it is expected that expenditures will exceed $750,000 ($1,000,000 in FY2026), the District procure audit services promptly. Further, for major programs supporting documentation should be reviewed to determine if any corrections need to be made or additional support need to be obtained.

Condition  For three of 40 general expenditures tested, totaling $156,144, the District did not retain a vendor invoice to support the disbursement of funds.  For one of five travel reimbursements selected, the District did not retain supporting documentation for the amounts paid.  For 12 of 40 expenditures tested, the District issued the purchase orders between one to 83 days after receipt of the invoice.  For five of 25 invoices selected for federal compliance, the District could not provide documentation to support the expenditure. Criteria Arizona Revised Statutes 15-271 states: "A. The auditor general shall determine the accounting systems, accounting methods and accounting procedures for school districts to use. B. The auditor general in conjunction with the department of education shall prescribe a uniform system of financial records (USFR) for all school districts to use each fiscal year." USFR VI-B Source documents states: "Source documents are used to initiate accounting transactions and should be retained to support each entry recorded in the accounting records." Uniform Guidance §200.333 Retention requirements for records states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report..." Cause Internal controls were not developed to ensure new staff was properly trained to maintain accounting records in a complete manner. In addition, controls were not monitored to ensure complete documentation was retained. Effect Financial information the District uses to make decisions and reports provided to the state for oversight could have been materially misstated throughout the fiscal year. Recommendation The District should procure a consultant or modify the organizational chart of the District Finance Office to ensure individuals with the skills, knowledge and expertise prepare, review and retain required source documentation. In addition, material transactions of the fiscal year should be reviewed and replacement documentation should be obtained to replace missing invoice information.

Condition The District did not retain documentation sufficient to determine that the Davis-Bacon compliance clause was included in advertised specifications. In addition, the District did not receive weekly certified payrolls from three contractors who were working on projects funded with Impact Aid construction awards. Criteria 40 USC 3142(a): "The advertised specifications for every contract in excess of $2,000, to which the Federal Government ... is a party, for construction ... of public buildings and public works of the Government .... that are located in a State ... which requires or involves the employment of mechanics or laborers shall contain a provision meeting stating the minimum wages to be paid various classes of laborers and mechanics. 40 USC 3145(a): " ... each contractor and subcontractor each week must furnish a statement on the wages paid each employee during the prior week." Cause The District did not have internal controls sufficient to ensure compliance. Effect The District is not in compliance with federal regulations. Recommendation We recommend that the District develop internal controls to ensure advertised solicitations contain the required clause. We further recommend that the District obtain certified payrolls for all construction projects funded with Federal Impact Aid awards.